Incomplete Information Outweighs Managerial Tendency to Ignore Critical Data

Programmed decision-making is possible when managers have the information they need to create rules that will guide decision- Nonprogrammer decision-making is required for neurotic decisions. Nonprogrammer decisions are decisions that are made in response to unusual or novel opportunities or threats. These occur when there are no ready-made decision rules that managers can apply to a situation. ; To make decisions in the absence of decision rules, managers may rely upon their intuition or they may make reasoned Judgments.

When using intuition, managers rely upon feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering, and result in on-the-spot decisions.

Reasoned Judgments re decisions that take time and effort and result from careful information gathering, generation of alternatives, and evaluation of alternatives. ; Although 'exercising one's Judgment is a more rational process than 'going with one's intuition, both processes are often flawed and can result in poor decision making.

Thus, the likelihood of error is much greater in nonprogrammer decision making than in programmed decision making.

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; Sometimes managers have to make rapid decisions and don't have the time for a more careful consideration of the issues involved, while at other times, they do have he time available to make reasoned Judgments. The Manager as a Person: Curbing Overconfidence Decades of research indicates that managers tend to be overconfident in the decisions that they make, and with overconfidence comes the failure to evaluate and rethink the wisdom of those decisions and learn from one's mistakes.

A distinction is made by researchers between the decision making skills of true experts who have extensive experience and managers who have some expertise.

It is the managers who have some experience in their content area but are not true experts that tend to e overly confident in their intuition and their reasoned Judgments, often do not learn from their mistakes, and are overconfident in their abilities and their influence over unpredictable events While the intuition of experts can also be faulty, it is less likely to be. To avoid the perils of overconfidence, managers can critically evaluate their decisions and outcomes.

They should also admit when they have made a mistake, learn from their mistakes, and be leery of too much agreement at the top, according to Professor Jeffery Prefer at Stanford University. The Classical Model should be made. Managers using this model make a series of simplifying assumptions about the nature of the decision-making process. ; The model's premise is that managers have access to all of the information they need to make the optimum decision. It also assumes that managers can easily list and rank each alternative from most to least preferred in order to reach an optimum decision.

The Administrative Model The administrative model explains why decision-making is always inherently risky and uncertain. It is based upon three important concepts: bounded rationality, incomplete information, and satisfying. Bounded rationality describes the situation in which the number of alternatives a manager must identify is so great and the amount of information so vast that it is difficult to evaluate it all. ; Incomplete is information because in most cases the full range of decision- making alternatives is unknown and the consequences associated with known alternatives are uncertain.

In other words, information is incomplete because of risk and uncertainty, ambiguity, and time constraints. 1 . Risk is present when managers know the possible outcomes of a particular course of action and can assign probabilities to them. Uncertainty exists when the probabilities of alternative outcomes cannot be determined, and future outcomes are unknown. 2. Much of the information that managers have at their disposal is ambiguous, and therefore can be interpreted in multiple and often confusing ways. 3.

There are six steps that managers should consciously follow to make a good decision. ; Recognize the Need for a Decision Some stimuli usually spark the realization within the organization that a decision needs to be made. The stimuli may originate from the actions of managers inside of the organization or from changes in the external environment. Be it proactive or active, it is imperative that managers immediately recognize this need and respond in a timely and appropriate manner ; Generate Alternatives A manager must generate a set of feasible alternative courses of action to take in response to the opportunity or threat.

Failure to properly generate and consider a variety of alternatives can lead to bad decisions. Sometimes managers find it difficult to generate creative, alternative solutions to specific problems. Generating creative alternatives may require that we abandon our existing mid-sets and develop new ones. ; Evaluate Alternatives Once managers have generated a set of alternatives, they must evaluate the advantages and disadvantages of each one. Successful managers use four criteria to evaluate the pros and cons of alternative courses of action.

Often a manager must consider these four criteria simultaneously. Some of the worst managerial decisions can be traced to poor assessment of the alternatives. 1. Legality: Managers must ensure that a possible course of action is legal. 2. Ethicalness: Managers must ensure that a possible course of action is ethical and that it will not unnecessarily harm any stakeholder group. 3. Economic feasibility: Managers must decide whether the alternatives can be accomplished, given the organization's performance goals, and do not cause harm to other goals of the organization. . Practicality: Managers must decide whether they have the capabilities and resources required to implement the alternative. Ethics in Action: Anna's Focus on Changing Culture Seventeen years after the Challenger disaster, history repeated itself on February 1, 2003, when Columbia broke up over Texas on the final day of its mission, killing all seven astronauts on board. Both accidents are partially the result of a flawed organizational culture at NASA where concerns with budgets and schedules were emphasized at the expense of safety.

In both cases, top decision makers seemed to ignore or downplay input from those before the Columbia launch, when presented with data indicating that a crucial ring failed to meet strength requirements, a manager waived the requirements instead of postponing the launch to address this problem. Bill Parsons, who now heads the troubled shuttle program is committed to changing the culture so that safety is a top priority, technical expertise is respected, and shuttles are not launched until all now problems are addressed. Choose Among Alternatives The next step is to rank the various alternatives using the criteria listed above in order to make a decision. Managers must be sure that all information that is available is used. Sometimes managers have a tendency to ignore critical information, even when it is available. ; Implement the Chosen Alternative Once a course of action has been determined, it must be implemented. Many managers make a decision and then fail to act on it. Thousands of subsequent decisions are necessary to implement a course of action.

It involves a critical analysis of the group's preferred alternative in order to ascertain its strengths and weaknesses before implementation. One member of the decision making group plays the role of devil's advocate by critiquing and challenging the way in which the group evaluated alternatives and selected one alternative over the other. Diversity among Decision Makers Promoting diversity within decision-making groups also improves group decision making by broadening the range of experiences and opinions that the group members can draw from as they generate, assess, and choose among alternatives.

Groups containing members from diverse backgrounds are less prone to grouping because of the differences that exist. The quality of organizational decision making ultimately depends on innovative responses to opportunities and threats. Organizational learning is the process through which managers seek to improve employees' desire and ability to understand and manage the organization. A learning organization is one in which managers do everything possible to maximize the potential for organizational learning to take place.

At the heart of every learning organization is creativity, the alternative courses of action. Creating a Learning Organization Peter Sense developed five principles for creating a learning organization. They are: 1 . Top managers must allow every person in the organization to develop a sense of personal mastery. 2. Organizations need to encourage employees to develop and use complex mental models. 3. Managers must do everything they can to promote group creativity and team learning. 4. Managers must emphasis the importance of building a shared vision. 5. Managers must encourage systems thinking.

Building a learning organization is neither a quick or easy process. It requires managers to change their management assumptions radically. Promoting Individual Creativity ; Research indicates that when certain conditions are met, managers are more keel to be creative. They include providing employees the opportunity and freedom to generate new ideas and allowing them an opportunity to experiment, to take risks, and to make mistakes and learn from them. Also employees must not fear that they will be penalized or looked down upon for ideas that at first seem outlandish. Other ways of promoting individual creativity are providing constructive feedback so that employees will know how they are doing and visibly rewarding employees who come up with creative ideas. Promoting Group Creativity Brainstorming, nominal group technique and the Delphi technique are used to encourage creativity at the group level. ; Brainstorming is a group problem solving technique in which managers meet face-to-face to generate and debate a wide variety of alternatives from which to make a decision.

This technique is very useful in some situations but at other times can result in a loss of productivity due to production blocking. A brainstorming session is conducted as follows: 1. One manager describes the problem in broad outline. 2. Group members share their ideas and generate courses of action. 3. Group members are not allowed to criticize each alternative until all have been heard. . Group members are encouraged to be as creative as possible. Anything goes, and been generated, the group members debate the pros and cons of each and develop a list of the best alternatives. The Nominal Group Technique The nominal group technique is more structured way of generating alternatives. It avoids production blocking and is especially useful when an issue is controversial. A nominal group technique session is conducted as follows: 1 . One manager outlines the problem to be addressed and group members write down ideas and solutions. 2. Managers read their suggestions to the group with no eroticism allowed. 3. The alternatives are discussed, and group members can critique or ask for clarification. 4. Each member ranks all the alternatives, and the highest-ranking one is selected. Delphi Technique If managers are in different locations, videoconferencing is one way to bring them together to brainstorm. Another way is to use the Delphi Technique, a written approach to creative problem solving. It works as follows: 1 . The group leader writers a statement of the problem and a series of questions to which participating managers are to respond. 2. The questionnaire is sent to he managers and departmental experts who are most knowledgeable about the problem; they are asked to generate solutions and mail the questionnaire back to the group leader. 3. A team of top managers record and summarize the responses.

The results are then sent back to the participants with additional questions to be answered before a decision can be made. 4. The process is repeated until a consensus is reached and the most suitable course of action is apparent. ; Promoting Creativity at the Global Level Organizations are under increasing pressure to reduce costs and develop global products. To do so, they typically centralize their R&D expertise to bring R&D managers together from different countries. Because this can pose some unique problems, managers must take special steps to encourage creativity among people from different countries who work together.